The "father of skyscrapers," Louis Sullivan, coined the phrase, “form follows function.” This is certainly true when it comes to organization design. Organizational design and structure are fundamentally about accelerating strategy execution. As a company’s strategy and culture evolve, so too must its structure. Evolving technologies, continued globalization, shifting social norms, and post-pandemic shifts are just a few of the challenges facing modern organizations. Commercial enterprises must either quickly adapt to change or be overtaken by their more agile competitors. This adaptation often requires a company’s leadership to undertake a complete organizational redesign.
While it is often stated that organization design is both art and science, it is too often neither. Rather than being based on strategic analysis and systematic planning, organizational structures unintentionally evolve based more upon politics and inertia. This unintentional “organizational meandering” creates disconnects of many kinds - promising ideas that simply die due to management inattention, silo thinking, turf wars that erode collaboration and slow decision-making, and strategic initiatives that simply stall or underperform.
The challenge with organization design and structure is that changing them amounts to intervening in a complex system with multiple co-dependent variables. Everything seems to impact everything else. Most choices involve trade-offs, with no perfect solutions. It is a matter of finding the right balance among polarities, such as centralization vs. decentralization, formal control vs. informal flexibility, function-centric vs. market- or customer-centric, to name just a few.
Further, these choices are important, but they bring little clarity without a deeper understanding of the company’s strategy, culture (both current and aspirational), and cost structure. In other words, knowing the range of choices is not the same as knowing which choices to make. A “model” of how various factors interact (of which there are many) is helpful but is only a starting point.
In my experience, there are six prevailing factors that differentiate the most successful organization design and structure initiatives:
- A continuous effort, not an emergency response
- Strategic clarity
- A focus on differentiating company capabilities
- A top-down and bottom-up approach to achieve cost efficiencies
- Rigorously measure and manage culture throughout the redesign (if not forever)
- Centrally manage process and change management
Finally, any inflection point, whether it be a new strategy, new leadership, new regulatory environment, new competitive threat, etc., should signal management to examine if, and to what extent, the organizational form can promote its function.